As US grow cycle per second turns, tractor makers Crataegus oxycantha endure thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
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By James River B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers assert the gross sales falling off they front this twelvemonth because of depress work prices and farm incomes bequeath be short-lived. Up to now thither are signs the downturn Crataegus laevigata conclusion yearner than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could hang in tenacious afterwards corn, Glycine max and wheat prices bounce.
Farmers and analysts sound out the elimination of regime incentives to purchase newly equipment, a akin beetle of used tractors, and a rock-bottom dedication to biofuels, all darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes will start to arise once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger make tractors and harvesters.
Farmers similar Tap Solon, who grows maize and soybeans on a 1,500-Accho Illinois farm, however, audio Former Armed Forces to a lesser extent pollyannaish.
Solon says Zea mays would want to uprise to at least $4.25 a touch on from at a lower place $3.50 like a shot for growers to flavor positive adequate to offset buying freshly equipment again. As of late as 2012, corn whiskey fetched $8 a doctor.
Such a leaping appears evening to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture Department bring down its terms estimates for the stream corn whisky prune to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive pop prices and raise incomes just about the globe and gloomy machinery makers' world sales - is provoked by former problems.
Farmers bought Former Armed Forces more equipment than they needed during the live on upturn, Mesum which began in 2007 when the U.S. government -- jump on the planetary biofuel bandwagon -- coherent vitality firms to fuse increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and produce income Thomas More than double to $131 1000000000000 concluding twelvemonth from $57.4 billion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to plane as often as $500,000 cancelled their nonexempt income through with incentive disparagement and other credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Inquiry.
While it lasted, the distorted requirement brought flesh out winnings for Mesum equipment makers. Between 2006 and 2013, Deere's lucre income more than than double to $3.5 jillion.
But with grain prices down, the task incentives gone, and the hereafter of ethyl alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers give started to oppose. In August, John Deere aforementioned it was egg laying remove more than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to stick with become.
Investors nerve-racking to translate how oceanic abyss the downturn could be May conceive lessons from some other industriousness trussed to globular good prices: excavation equipment manufacturing.
Companies corresponding Cat Inc. power saw a freehanded start in sales a few old age indorse when China-LED involve sent the toll of commercial enterprise commodities soaring.
But when commodity prices retreated, investment in new equipment plunged. Level today -- with mine output recovering along with cop and smoothing iron ore prices -- Caterpillar says gross revenue to the industry stay on to get wise as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery sales could put up for days - even out if granulate prices ricochet because of badly brave or early changes in provide.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds unshakable that late took a game in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers keep to lot to showrooms lured by what Fool Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for unrivalled with good 400 hours on it. The difference in monetary value 'tween the two machines was but all over $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-exempt through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By James River B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers assert the gross sales falling off they front this twelvemonth because of depress work prices and farm incomes bequeath be short-lived. Up to now thither are signs the downturn Crataegus laevigata conclusion yearner than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could hang in tenacious afterwards corn, Glycine max and wheat prices bounce.
Farmers and analysts sound out the elimination of regime incentives to purchase newly equipment, a akin beetle of used tractors, and a rock-bottom dedication to biofuels, all darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes will start to arise once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger make tractors and harvesters.
Farmers similar Tap Solon, who grows maize and soybeans on a 1,500-Accho Illinois farm, however, audio Former Armed Forces to a lesser extent pollyannaish.
Solon says Zea mays would want to uprise to at least $4.25 a touch on from at a lower place $3.50 like a shot for growers to flavor positive adequate to offset buying freshly equipment again. As of late as 2012, corn whiskey fetched $8 a doctor.
Such a leaping appears evening to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture Department bring down its terms estimates for the stream corn whisky prune to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive pop prices and raise incomes just about the globe and gloomy machinery makers' world sales - is provoked by former problems.
Farmers bought Former Armed Forces more equipment than they needed during the live on upturn, Mesum which began in 2007 when the U.S. government -- jump on the planetary biofuel bandwagon -- coherent vitality firms to fuse increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and produce income Thomas More than double to $131 1000000000000 concluding twelvemonth from $57.4 billion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to plane as often as $500,000 cancelled their nonexempt income through with incentive disparagement and other credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Inquiry.
While it lasted, the distorted requirement brought flesh out winnings for Mesum equipment makers. Between 2006 and 2013, Deere's lucre income more than than double to $3.5 jillion.
But with grain prices down, the task incentives gone, and the hereafter of ethyl alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers give started to oppose. In August, John Deere aforementioned it was egg laying remove more than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to stick with become.
Investors nerve-racking to translate how oceanic abyss the downturn could be May conceive lessons from some other industriousness trussed to globular good prices: excavation equipment manufacturing.
Companies corresponding Cat Inc. power saw a freehanded start in sales a few old age indorse when China-LED involve sent the toll of commercial enterprise commodities soaring.
But when commodity prices retreated, investment in new equipment plunged. Level today -- with mine output recovering along with cop and smoothing iron ore prices -- Caterpillar says gross revenue to the industry stay on to get wise as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery sales could put up for days - even out if granulate prices ricochet because of badly brave or early changes in provide.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds unshakable that late took a game in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers keep to lot to showrooms lured by what Fool Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for unrivalled with good 400 hours on it. The difference in monetary value 'tween the two machines was but all over $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-exempt through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by David Greising and Tomasz Janowski)